Most participants remain bullish on crude oil, especially for the second half of 2023.
This is what analysts at Macquarie Bank Limited noted in a new report sent to Rigzone, which outlines a summary of views from the International Energy Week 2023.
As for more “key oil market implications,” the analysts said in the note that China remains the key regional driver, “with FY23 demand growth estimates ranging from 800,000 barrels per day to two million bpd” and that global growth in jet fuel demand is the key product driver “with high-conviction bulls looking for a massive 1.2-to-1 increase .5 million barrels per day this year.”
“Overall, most market participants remain bullish on oil, particularly in 2H23. As expected, the main driver of bullish views is the result of strong expectations for demand growth in reopening of China,” the analysts said in the report.
“Indeed, some estimates of the increase in China’s demand from the reopening were in the range of 1.5 million barrels per day, and the high China demand growth estimate was of more than 2 million barrels per day,” the analysts added.
“Unsurprisingly, everyone in the market is assigning most of the growth in demand to jet fuel on the assumption that Chinese air travel recovers to pre-Covid levels and then quickly reaches new highs during the year” , they continued.
In the report, analysts stated that many funds, oil producers and refiners are best described as “range bulls, meaning looking for Brent to trade between $75 and $95 as it reaches the high end of the range more often than the low end.” .
“At the margin, this appears to be the fastest growing category of oil market outlook as it simultaneously incorporates broad macro risks and supply growth along with the benefits of China’s reopening,” the analysts said.
Analysts also noted that some companies and funds were wary of the global macro situation “and believed that the increase in demand related to China’s reopening would disappoint.”
“The view was based on the idea that global economic pressures would limit demand growth in China and the rest of the world,” the analysts added.
Outlining their outlook in the report, analysts said they were inclined to be optimistic in the short term, but added that “global balances are making it difficult to stay on course.”
“Our balances result in surpluses of 1.5 million barrels per day through the first half of 2023,” the analysts added.
“However, event risks are largely upside, including the potential for Chinese demand to grow by 1.5 million bpd compared to our estimate of 800,000 bpd, supply from Russia falls sharply and West and North African output falls back to 2022 levels,” the analysts continued. .
The Energy Institute’s International Energy Week took place from 28 February to 2 March at the Intercontinental London Park Lane. Analysts at Standard Chartered also provided an inside look at the event earlier this month.
In its latest oil market report, which was published in February, the International Energy Agency (IEA) noted that global oil demand will increase by two million barrels per day in 2023 to 101, 9 million barrels per day.
“The Asia-Pacific region (+1.6 million bpd), fueled by a resurgent China (+900,000 bpd), dominates the growth outlook,” the IEA said in the report.
“Reopening borders will increase air traffic. Jet/kerosene demand is expected to increase by 1.1 million bpd to 7.2 million bpd, 90 percent of 2019 levels” , the IEA added.
The organization’s next oil market report is scheduled for release on March 15.
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